Meet the Supercharged Growth Stock That Could Make You a Millionaire

Companies that can tap into a specialized market and execute a repeatable and successful business model can be lucrative investments. Chipotle Mexican Grill is a shining example. The company's stock has appreciated over 6,300% since 2006 because it continues to open stores with a focused menu highlighting fresh Mexican cuisine that people enjoy.

Cava Group (NYSE: CAVA), a casual restaurant chain serving Mediterranean food, could be on a similar trajectory.

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The timing of Cava's emergence could be perfect. U.S. consumers are looking for other fresh cuisine options. Here is why the stock could follow in Chipotle's footsteps and generate life-changing wealth for investors over the next 10 to 20 years.

Capturing an untapped opportunity in the quick-service restaurant space

Corporate chains are a staple in America's restaurant industry. There are boundless options for almost any cuisine. If you want Mexican food, there's Taco Bell and Chipotle (among others). The same goes for pizza and Italian food. You can throw a stone and hit any number of burger fast-food joints. Yet, there isn't a nationwide brand for Mediterranean food.

That may not last for long. Mediterranean food has become increasingly popular with U.S. consumers over the past decade. According to a 2024 Harris poll, the Mediterranean diet has an 80% popularity rate among Americans. That made it the most popular diet for the survey's seventh consecutive year.

Cava is among a handful of emerging regional players trying to grab the market by the horns. It follows Chipotle's playbook, using a focused menu and fresh ingredients to prepare meals quickly and affordably while delivering a higher level of quality than typical fast food. Given Chipotle's abundant success, this could be a wise move.

A long runway for growth ahead

The company has approximately 352 stores across only about half the U.S. states. For reference, Chipotle has over 3,600 U.S. locations and is still expanding.

In other words, Cava's business has lots of room to grow.

It also goes beyond opening stores. Cava is already highly profitable for how young the business is. It's already generating restaurant-level profit margins of 25% to 26%. Chipotle's stores operated at 26.7% margins in fourth-quarter 2024, despite having a much larger footprint and the supply chain efficiency that comes with that.

Cava also generates free cash flow, which helps fund new locations and stack cash on the balance sheet. As Cava matures, investors could see that cash trickle back to them as dividends or share repurchases.

Why investors might not want to rush in

While the stock is over 10% off its highs, shares remain valued at a price-to-sales ratio of over 16. That's over twice Chipotle's valuation, which is already arguably steep. Cava's stock probably reflects some of the company's future growth at these prices. Remember, impressive stocks almost always command a higher valuation, especially when the market is doing well. Still, that doesn't mean investors should avoid it entirely.

If Cava continues to thrive as it has (it posted an eye-popping 12.9% increase in same-store traffic in Q3 2024), the business will be far larger in a decade than it is now. The underlying business should grow into its valuation over time. Still, the market will inevitably wobble along the way. When the time comes, the volatility could drag Cava's valuation down to more appealing levels.

Until then, consider buying Cava in small chunks and buy slowly. Keep some cash handy for better buying opportunities. Add confidently when the time comes -- Cava's business seems poised for great things over the next decade.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends Cava Group and recommends the following options: short March 2025 $58 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.